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Article
Publication date: 30 March 2021

Yuxin Wang and Guanying Wang

The purpose of this paper is to explore how the price limit policy implemented in 2014 affects initial public offering (IPO) underpricing and long-term performance in China.

Abstract

Purpose

The purpose of this paper is to explore how the price limit policy implemented in 2014 affects initial public offering (IPO) underpricing and long-term performance in China.

Design/methodology/approach

The data are the IPOs from Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange (SZSE) between 2004 and 2018. The data are firstly divided into the IPOs before the price limit policy and the IPOs after the price limit policy according to the time of issuance. Then the two groups are divided into 4 subsamples according to the market blocks and the P/E ratio. The authors use multiple regression models to explore the effect of price limit policy in each subsample.

Findings

The first-day price limit system for IPOs is similar to the upward fuse mechanism, the purpose of which is to suppress IPO underpricing. However, this study finds that the policy does not suppress IPO underpricing, but increases the underpricing rate in all subsamples. Besides, the long-term performance in each subsample is different from each other. Main Board stocks’ long-term performance is worse after the policy. The policy makes Small and Medium Enterprise Board (SME Board) and Growth Enterprise Market Board (GEM Board) stocks with high P/E ratios perform better in the long term. For SME Board and GEM Board stocks with low P/E ratios, the policy makes no significant effect.

Practical implications

Good policy intentions may sometimes lead to counterproductive effects. However, since the long-term performance of each subsample is different, it is difficult to judge whether the policy should continue to be implemented or cancelled. Implementing different policies for different subsamples may be a better way to solve this problem.

Originality/value

This paper contributes to the study of IPO underpricing and long-term performance from the perspective of price limit policy.

Details

Managerial Finance, vol. 47 no. 9
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 1 July 2004

Daniel F.S. Choi and Woramon Clovutivat

The Thai stock market maintains two separate listings for common stocks which have reached foreign ownership limits. Prices on the Foreign Board are typically traded at a premium…

608

Abstract

The Thai stock market maintains two separate listings for common stocks which have reached foreign ownership limits. Prices on the Foreign Board are typically traded at a premium relative to prices on the Main Board. The price premium is both a measure and evidence of market segmentation. Thai commercial banks were faced with financial and operational difficulties in the wake of the 1997 financial crisis. To rescue the banking industry, the Thai government relaxed the foreign ownership limit for a ten‐year period. We show in this paper that the Thai banking industry was segmented before the crisis; but when the foreign ownership limits were removed, the banking industry was integrated.

Details

Managerial Finance, vol. 30 no. 7
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 8 May 2018

Graeme Newell and Muhammad Jufri Bin Marzuki

The Alternative Investment Market (AIM) is an important UK growth-focused stock market. The purpose of this paper is to assess the significance, risk-adjusted performance and…

Abstract

Purpose

The Alternative Investment Market (AIM) is an important UK growth-focused stock market. The purpose of this paper is to assess the significance, risk-adjusted performance and portfolio diversification benefits of property companies on the AIM stock market over 2005-2015. The post-Global Financial Crisis (GFC) recovery of property companies on AIM is highlighted, as well as their performance compared with property companies on the London Stock Exchange (LSE) main board.

Design/methodology/approach

Using monthly total returns, the risk-adjusted performance and portfolio diversification benefits of property companies on the AIM stock market over 2005-2015 are assessed and compared with a range of other asset classes. Sub-period analysis is used to assess the post-GFC recovery of the property companies on AIM.

Findings

Property companies on AIM delivered poor risk-adjusted returns over 2005-2015, with limited portfolio diversification benefits with the overall AIM stock market. However, since the GFC, property companies on AIM have delivered strong risk-adjusted returns, with improved portfolio diversification benefits with the overall AIM stock market. This post-GFC performance is shown to be more than a small cap effect, reflecting the property portfolios in these AIM property companies. Despite this strong post-GFC performance, the AIM property companies under-performed property companies on the LSE main board on a risk-adjusted basis.

Practical implications

AIM provides an important platform for property companies seeking start-up and growth opportunities in a less-regulated funding environment. This has been reinforced by strong risk-adjusted performance in a post-GFC context. However, the stronger risk-adjusted performance of LSE listed property companies and their superior scale, resources and higher quality property portfolios present challenges for increased investor support for the AIM property companies going forward.

Originality/value

This paper is the first published empirical research analysis of the risk-adjusted performance and diversification benefits of property companies on the AIM stock market. This research enables empirically validated, more informed and practical property investment decision-making regarding the strategic role of property companies on the AIM stock market in a portfolio.

Details

Journal of European Real Estate Research, vol. 11 no. 1
Type: Research Article
ISSN: 1753-9269

Keywords

Article
Publication date: 6 June 2023

Kitty Mo Kong and Hedy Jiaying Huang

This paper investigates whether the audit fees of Chinese listed firms are associated with the share pledging practice of the firm’s controlling shareholders.

Abstract

Purpose

This paper investigates whether the audit fees of Chinese listed firms are associated with the share pledging practice of the firm’s controlling shareholders.

Design/methodology/approach

This study uses the audit pricing model to estimate the association between the share pledging of listed firms and audit fees. Cross-sectional analysis is conducted on a large sample of Chinese listed firms during the period 2004 to 2019. The authors further test the moderating effects of listing on the Main Board, state ownership and abnormal audit report lag on the association between share pledging and audit fees. The results remain robust to various endogeneity tests including two-stage least squares instrumental variable analysis, entropy balancing analysis and difference-in-difference analysis.

Findings

The study finds that audit fees are positively associated with the proportion of shares pledged by the listed firm’s controlling shareholder in China. The results also provide new evidence that the positive association between audit fees and the share pledging of controlling shareholders could be mitigated if the firm is listed on the Main Board and/or it is a state-owned enterprise. In contrast, pledged firms with abnormal audit report lag are found to have higher audit fees than their pledged counterparts without the excessively long audit delay.

Practical implications

Findings of this study have important practical implications to those charged with governance, as boards need to comprehensively understand the adverse consequences of share pledging when pursuing it as the firm’s major source of financing. The study also has policy implications for stock market regulators such as the China Securities Regulatory Commission in China. Regulators could consider developing a threshold-based share pledging disclosure and pledge ratio requirements based on factors such as a firm’s listing status and ownership structure.

Originality/value

This study provides new evidence on the audit-related consequences of share pledging in a significant capital market. Findings of this study also enrich the existing audit literature by introducing the share pledging activities of controlling shareholders into the audit pricing decision-making model.

Details

Pacific Accounting Review, vol. 35 no. 4
Type: Research Article
ISSN: 0114-0582

Keywords

Article
Publication date: 1 March 2006

Malcolm Smith, Anita Jamil, Yang Chik Johari and Syahrul Ahmar Ahmad

The obfuscation hypothesis suggests that under‐performing firms will tend to obscure the meaning of their corporate narratives by deliberately adopting a textual complexity, most…

1052

Abstract

Purpose

The obfuscation hypothesis suggests that under‐performing firms will tend to obscure the meaning of their corporate narratives by deliberately adopting a textual complexity, most readily apparent through poor readability and the use of unnecessarily difficult language. This paper seeks to add to the literature in the area by comparing the textual complexity of corporate narratives, notably the chairman's statement, of main board and second board companies on the Bursa Malaysia (formerly known as the Kuala Lumpur Stock Exchange), with their financial performance, and also to examine the impact of company size, board membership and degree of statutory regulation on the readability of corporate narratives.

Design/methodology/approach

Following the existing literature this paper uses readability as a proxy for textual complexity, in addition to more direct measures, and seeks to examine relationships between textual complexity and various measures of financial performance.

Findings

The findings suggest that there are significant relationships between corporate language and financial performance, but that these are not consistent with the obfuscation hypothesis.

Originality/value

The findings are consistent with the suggestion that increased regulation and statutory monitoring of disclosures are associated with improved readability of narrative. They do not provide support for the obfuscation hypothesis.

Details

Asian Review of Accounting, vol. 14 no. 1/2
Type: Research Article
ISSN: 1321-7348

Keywords

Book part
Publication date: 19 July 2014

Sonia Moi, Fabio Monteduro and Luca Gnan

Recent literature on nonprofit boards of directors has extensively investigated the composition, role, responsibilities, and characteristics of boards. Given the growing number of…

Abstract

Purpose

Recent literature on nonprofit boards of directors has extensively investigated the composition, role, responsibilities, and characteristics of boards. Given the growing number of studies on nonprofit boards, which added new impulse to the debate on the role and characteristics of these players, it is time to analyze the state of the art and systematize the current knowledge. On the other hand, despite the presence of some literature reviews, a research comparing the debate among the nonprofit, private, and public sectors is still lacking. Using Gabrielsson and Huse’s (2004) framework, we wanted to identify factors that can influence research on nonprofit boards and compare our results with existing studies on private and public sector.

Methodology/Approach

We conduct a systematic literature review, selecting empirical articles published in international scientific journals from 1992 to 2012.

Findings

We found similarities and differences in relation to research on boards among sectors. As a common result, we found that evolutionary studies still remains a neglected area in all of three realms. Finally, whereas input–output studies prevail in the private sector and contingency studies prevail in the public sector, behavioral studies prevail in the nonprofit sector, demonstrating, also, that the sector itself can make a difference in the board’s research.

Research Limitations/Implications

This literature review provides some suggestion for further research on boards for all of three sectors. For example, we suggest complementing research on boards on all three sectors, especially in relation to evolutionary studies.

Originality/Value of Paper

This paper fills the need to clarify the status of research on nonprofit boards, in order to address scholars in the understanding of the phenomenon.

Details

Mechanisms, Roles and Consequences of Governance: Emerging Issues
Type: Book
ISBN: 978-1-78350-706-1

Keywords

Article
Publication date: 18 May 2010

Nurwati A. Ahmad‐Zaluki and Wan Nordin Wan‐Hussin

This paper aims to extend the research on the Malaysian initial public offering (IPO) management earnings forecasts by examining the impact of corporate governance mechanisms and…

3849

Abstract

Purpose

This paper aims to extend the research on the Malaysian initial public offering (IPO) management earnings forecasts by examining the impact of corporate governance mechanisms and earnings forecasts accuracy. It seeks to investigate whether effective corporate governance is a credible signal of improving the quality of financial information.

Design/methodology/approach

A sample of 235 IPO companies that went public during the period 1999‐2006 was used. Absolute forecast error was used to proxy for earnings forecast accuracy and to represent financial disclosure quality.

Findings

Companies with a higher percentage of non‐executive directors in the audit committees and larger audit committee size exhibit greater forecast accuracy. The accuracy of IPO earnings forecast is also positively influenced by the use of brand‐name auditor.

Practical implications

The results suggest that effective corporate governance is a credible signal of improving the quality of financial information. The role of audit committee as financial monitors as suggested by the agency theory supports this paper.

Originality/value

The results are consistent with the belief that effective corporate governance is associated with higher financial disclosure quality. The results also support the decisions made by Malaysian regulators such as the Securities Commission to enhance the quality of financial disclosure by revising the Malaysian Code on Corporate Governance to encourage public companies to implement good governance practices such as audit committee independence.

Details

Asian Review of Accounting, vol. 18 no. 1
Type: Research Article
ISSN: 1321-7348

Keywords

Article
Publication date: 21 February 2022

Camélia Radu, Nadia Smaili and Adela Constantinescu

This study investigates the relation between the board of directors' attributes and corporate social performance. The authors examine three board of directors: characteristics…

Abstract

Purpose

This study investigates the relation between the board of directors' attributes and corporate social performance. The authors examine three board of directors: characteristics, size, independence and gender diversity, and how they interact with industry to affect corporate social performance.

Design/methodology/approach

The authors use a multivariate approach to analyze and compare the effects of governance variables on two aspects of corporate social performance, its environmental and social dimensions.

Findings

Based on a sample of 983 firm-year observations, our main findings indicate that board independence, size and gender diversity each has a different impact on the environmental and social dimensions of performance, but that industrial sector moderates these effects. In particular, our results show that board member independence is positively associated with the environmental dimension of the performance of all the sample industries, but only has a positive association with the social dimension when the firms are in industries other than those that are environmentally sensitive. For these latter industries, board independence is negatively associated with the social dimension. Board size is positively associated with the environmental dimension for environmentally sensitive industries only and with the social dimension for all the industries examined, with a stronger positive effect on the latter in regard to environmentally sensitive industries.

Research limitations/implications

Women directors appear to raise social and environmental concerns within the board, as evidenced by their positive effect on the firms' social and environmental performance, with a stronger impact on the former.

Practical implications

Regulators can promote changes to the way Canadian companies select directors for the purpose of achieving sustainable performance while investors will be better informed about the impact of some of the board attributes on the environmental and social dimension of performance.

Originality/value

This study provides a portrait of the impact of governance attributes on the environmental and social dimension of performance of Canadian companies. Given the increasing interest in gender diversity in recent years, this study provides new evidence on the benefits of female board members for the two non-financial dimensions of performance.

Details

Journal of Applied Accounting Research, vol. 23 no. 5
Type: Research Article
ISSN: 0967-5426

Keywords

Article
Publication date: 18 May 2015

David G McMillan and Pornsawan Evans

The purpose of this paper is to examine the nature of equity ownership of state-owned enterprises (SOEs) for over 2,000 listed firms in China. The paper examines both the pattern…

Abstract

Purpose

The purpose of this paper is to examine the nature of equity ownership of state-owned enterprises (SOEs) for over 2,000 listed firms in China. The paper examines both the pattern of state ownership and the dynamics of stock returns and volatility. Firms under the control of SOEs dominate the Chinese stock markets and currently account for over three-quarters of total market capitalisation. Central SOEs are focused in strategic industries, while Local SOEs concentrate on pillar industries relating to consumer goods and services.

Design/methodology/approach

The authors obtain firm-level data from the Shanghai and Shenzhen stock markets and using panel estimation techniques examine the dynamics of returns, volatility and their relationship.

Findings

The authors report an increase in state control among listed firms compared to earlier reported figures. This is contradictory to the expectation of a lower state influence following China joining of the World Trade Organisation in 2001. In examining the behaviour of stock returns the authors find evidence of daily and monthly autocorrelations that are larger and of a different sign to that reported for western markets. The authors also report evidence of volatility persistence but little evidence of volatility asymmetry, again in contrast to that often reported for other markets. Finally, the authors find evidence of either no or a negative relationship between returns and volatility (risk) that differs from our usual view of risk aversion.

Originality/value

It is hoped, knowledge of these dynamics will increase the understanding of the Chinese equity market, which in turn is important for those engaged in international portfolio management and micro-structure modelling.

Details

China Finance Review International, vol. 5 no. 2
Type: Research Article
ISSN: 2044-1398

Keywords

Article
Publication date: 5 February 2018

Michelle Li and Helen Roberts

This paper aims to examine the relationship between board independence and firm performance for publicly listed New Zealand (NZ) firms over the period 2004-2016.

Abstract

Purpose

This paper aims to examine the relationship between board independence and firm performance for publicly listed New Zealand (NZ) firms over the period 2004-2016.

Design/methodology/approach

To address endogeneity concerns, the relationship between firm performance and board independence is modelled using three different approaches: firm fixed-effect estimation, difference-in-difference estimation and two-stage least squares estimation, while controlling for firm and governance characteristics.

Findings

The main finding is that the mandated board independence introduced by the Best Practice Code does not improve operating or market performance for listed NZ firms.

Research limitations/implications

The fact that NZ firms choose greater board independence than required is puzzling. Research examining director characteristics and connectedness, not captured by the NZX Code, may be a fruitful area for future research when disclosure allows.

Practical implications

Regulators may need to review reasons for mandating changes in factors affecting firm governance before implementing further regulations concerning board structure.

Social implications

The findings cast doubt on the benefit of mandated board independence for NZ firms. The results imply that “good” governance practices proposed by regulators are not universal.

Originality/value

This paper tests the impact of mandated board independence following the adoption of the Best Practice Code in 2004 using methodologies that account for endogeneity using 13 years of data.

Details

Pacific Accounting Review, vol. 30 no. 1
Type: Research Article
ISSN: 0114-0582

Keywords

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